Core Viewpoint - Goldman Sachs has issued a bullish outlook on the Chinese semiconductor industry, raising target prices for SMIC and Hua Hong Semiconductor for the fourth time in a month, citing long-term benefits from AI-driven chip demand growth [1] Group 1: Target Price Adjustments - Goldman Sachs raised the 12-month target price for SMIC's H-shares to HKD 117.0 and A-shares to CNY 211.0 [1][4] - Hua Hong Semiconductor's target price was increased by 34% to HKD 117.0, maintaining a "buy" rating for both companies [1][3] Group 2: AI Model Breakthroughs - The recent release of DeepSeek's experimental model DeepSeek V3.2-Exp significantly reduced training and inference costs, with API costs dropping over 50% [1][2] - The input cost is now between CNY 0.2-2 per million tokens, while the output cost is CNY 3 per million tokens [2] Group 3: Demand for Semiconductor Components - The explosion of AI applications in China is expected to create massive demand for various chips, including PMICs, Bluetooth/WiFi, CIS, RF, and MCUs [1][3] - AI's widespread adoption will drive increased demand for peripheral chips, which are primarily produced by SMIC and Hua Hong Semiconductor [3] Group 4: Capacity Expansion and Technological Upgrades - Both companies are steadily expanding their production capacity and upgrading technology, with SMIC increasing its 7nm/14nm capacity and Hua Hong planning to migrate to 28nm in its next fab [3] - The optimistic outlook for China's AI ecosystem is leading to a revaluation of semiconductor companies in the market [3] Group 5: Valuation Models - Goldman Sachs updated its valuation models, raising Hua Hong Semiconductor's target price based on a new expected P/E ratio of 68.8 for 2028 [3] - SMIC's H-share target price was also raised to HKD 117.0, reflecting a new expected P/E ratio of 62.9 for 2028 [3]